Corporate reporting in the midst of a storm

Amidst the current turmoil in the markets, on 26 March, regulators the Financial Conduct Authority, Financial Reporting Council and Prudential Regulation Authority issued a joint statement outlining a number of actions to ensure the continued flow of information and proper functioning of the UK’s capital markets. Their stance was that equity and debt capital markets will play a vital role in the recovery of the economy which has been damaged by the impact of COVID-19.

Their statement linked to several other statements which, in total, include a plethora of information containing guidance for both companies and auditors.

In summary, the key points for companies are:

  • the FCA is now permitting a delay in the publication of listed company audited financial reports from 4 to 6 months from the end of the financial year. This is a temporary measure which will be lifted when the regulators deem appropriate; and
  • companies are urged to make use of the additional time as the coronavirus pandemic is causing many companies to significantly adjust their business and operations. Market participants are told not to make undue inferences from such a delay.

On Guidance

Boards cannot predict the extent and duration of the COVID-19 pandemic nor its consequences for the global economy. It is however reasonable for investors to expect companies to be able to articulate their expectations of the possible impacts on their specific business in different scenarios.

Investors and other users of corporate reports want to understand a company’s resilience in the face of current uncertainty and to understand the key assumptions and judgements a board is making when assessing that resilience and in preparing company financial statements.

Of particular importance is the availability of cash within a group of companies, the ability to transfer such resources around the group to where it is needed, given operational, regulatory and legal constraints, and the access to further cash through existing and potential financing facilities.

On Dividends

Many companies have already adjusted their approach to dividends and their shorter-term dividend policies to support their balance sheets and provide financial flexibility. For those companies that have proposed but not yet paid a dividend, directors need to consider not only the position of the company when the dividend was proposed but also when it is paid. Where the company is no longer able to pay a dividend, directors should halt any dividend and communicate as appropriate to the market.

On Corporate Governance

The key messages to boards on corporate governance are to:

develop and implement mitigating actions and processes to ensure that boards continue to operate an effective control environment, addressing key reporting and other controls on which reliance has been placed historically but which may not prove effective in the current circumstances; and

consider how boards will secure reliable and relevant information, on a continuing basis, in order to manage the future operations, including the flow of financial information from significant subsidiary, joint venture and associate entities.

Companies should still observe their disclosure obligations under the Market Abuse Regulation and update the market where COVID-19 and government responses to it may alter their prospects.


On a separate matter, as we approach AGM season, notably for companies with 31 December year-ends, it is worth noting that there has been no change to company law in the light of the challenges posed by COVID-19 and the social distancing measures imposed by the government. Under the Companies Act 2006, a public-limited company must hold its AGM within six months of its financial year-end.

Virtual meetings, where there is no physical meeting at all, are permitted under English law but have been frowned upon due to investor protection. However, it is to be expected that investors would be understanding of a change in status to virtual due to overriding health and safety concerns in the current climate. Some companies are looking at hybrid meetings, a combination of a physical and virtual meeting, but there are very few precedents and in most cases they will not be viable for this year due to timing constraints.

For most companies, which do not have the provision for hybrid meetings in their articles of association, physical meetings are the only possibility. Nevertheless, companies can take steps to encourage shareholder participation and at the same time discourage physical attendance due to health and safety concerns. These include:

  • encouraging shareholders to submit proxies ahead of the AGM to ensure their vote is counted;
  • enabling shareholders to attend the meeting via a livestream webcast; and
  • implementing processes to enable shareholders to ask questions before the meeting and have them addressed either at the AGM itself or on the company’s website.

Given the general decline in physical attendance at AGMs, the current coronavirus crisis may in fact have expedited greater digital shareholder engagement as the norm. It is undoubtedly a trend that was fast approaching, given the improvements in technology and the cost savings involved, so arguably this has jolted companies into bringing forward new practices sooner than expected.